Overview of the Registration Process. Registrant Outreach Seminar February 2014

Transcription

1 Overview of the Registration Process Registrant Outreach Seminar February 2014

2 Disclaimer The presentation is provided for general information purposes only and does not constitute legal or accounting advice. Information has been summarized and paraphrased for presentation purposes and the examples have been provided for illustration purposes only. Information in this presentation reflects securities legislation and other relevant standards that are in effect as of the date of the presentation. The contents of this presentation should not be modified without the express written permission of the presenters. 2

3 Registration Regime Ontario Securities Act sets up an investor protection regime Standards relating to integrity, proficiency, and solvency Must meet these standards at time of initial registration, and ongoing condition of registration 3

4 Presentation Overview What s new Common filing deficiencies NRD issues 4

5 Compliance and Registrant Regulation Branch Director Debra Foubert Team 1 Portfolio Manager Team 2 Investment Fund Manager Team 3 Dealer Team 4 Registrant Conduct Team 5 Compliance Strategy & Risk Analysis Team 6 Registration 5

6 Team 6 - Registration Manager Registration Kelly Everest Registration Supervisor (Portfolio Managers) Allison McBain Registration Supervisor (Investment Fund Managers) Oriole Burton Registration Supervisor (Dealers) Kirsty MacDonald Registration Officers Kamaria Hoo Jenny Tse Lin Tsang Pamela Woodall Marsha Hylton Registration Officers Feryal Khorasanee Rachel Palozzi Kipson Noronha Maria Aluning Diana Cober Toni Sargent Registration Officers Christy Yip Maria Talag Edgar Serrano Anthony Ng 6

7 Registration Team What We Do Register, amend, suspend and revoke registration of firms and their representatives Often your first point of contact Seek legal and compliance support from Teams 1-4 as required 7

8 On-line Forms and Electronic Filings OSC Rule Electronic Delivery of Documents to OSC Mandatory as of February 19, 2014 OSC s web filing portal Web based forms or PDFs Law_forms_index.htm 8

9 Forms and Filings - Firms Form Use this form to: Submission method Form F6/ F6 Firm Registration Form F3/ F3 Business Locations other than Head Office Form F5/ F5 Change of Information Insurance information Apply for initial registration as a dealer, adviser or investment fund manager Apply to add a category or jurisdiction to an existing registration Notify the OSC of the opening of, or any change to, a business location of the firm Notify the OSC of a change to previously submitted registration information Notify the OSC of changes to previously submitted insurance information Complete form and submit a copy online. PDF: Form F6 PDF: Form F6 NRD Complete form and submit a copy online. PDF: Form F5 PDF: Form F5 Online Form 9

10 Forms and Filings Individuals Form Form F1/33-506F1 Notice of Termination of Registered and Permitted Individuals Form F2/ F2 Change or Surrender of Individual Categories Form F4/ F4 Registration of Individuals and Review of Permitted Individuals Form F5/33-506F5 Change of Information Use this form to: Notify the OSC of the termination of a registered or permitted individual s authority to act on behalf of the firm Apply for registration or approval in an additional category Surrender a category while maintaining registration in one or more other categories Apply for registration in individual categories or review as a permitted individual Notify the OSC of a change to previously submitted registration information Submission method NRD NRD NRD NRD Form F7/ F7 Reinstatement of Registered Individuals and Permitted Individuals Transfer individual s registration between sponsoring firms or reinstate an individual s registration or a permitted individual status NRD 10

11 Forms and Filings Financial Form Form F1 Calculation of Excess Working Capital Financial statements and other financial information Subordination Agreements Use this form to: Determine and notify the OSC of a firm s excess working capital as at the end of a financial year or interim period Deliver required financial information to the regulators Notify the OSC that a firm has executed a subordinated loan agreement and relying on it for the purposes of Form F1 Submission method Online form Online form Online form Repayment or termination of a subordination agreement Capital deficiency Notify the OSC of a repayment of a subordinated loan or termination of a subordination agreement Notify the OSC of a capital deficiency (i.e. excess working capital of a registered firm is less than zero) Online form to registration@ 11 osc.gov.on.ca

12 Form Forms and Filings Participation Fees Form F4/ F1 Participation Fee Calculation Adjusted Form F4 and Form F5/ Adjusted Form F1 and Form F2 Use this form to: Determine and notify the OSC of participation fees payable All registered firms and unregistered exempt international firms must complete this form by December 1 each year Unregistered investment fund managers only must complete this form within 90 days after the end of each of its fiscal years Determine and notify the OSC of adjusted participation fees payable. Firms who provided a Form F4 or Form F1 (above) based on estimated revenues must complete these forms electronically within 90 days of their fiscal year end only if their participation fee payable has changed Submission method Form F4: Online form Form F1: Online form Adjusted Form F4 and Form F5: Online form Adjusted Form F1 and Form F2: Online form 12

13 Form Forms and Filings - Registration Exemptions Form F2 Submission to Jurisdiction and Appointment of Agent for Service Use this form to: To notify the OSC of reliance on the exemption from the registration requirement under sections 8.18 International Dealer and 8.26 International Adviser of National Instrument Registration Requirements and Exemptions Submission method Complete the form and submit a copy online. Form F3 Use of Mobility Exemption Notify the OSC of an individual s reliance on an exemption from the registration requirement under section 2.2 Client mobility exemption - individuals Complete the form and submit a copy online. Form F1 Submission to Jurisdiction and Appointment of Agent for Service for IFM Notify the OSC of reliance on the permitted client exemption for international investment fund managers under section 4 Permitted clients Complete the form and submit a copy online. 13

14 Forms and Filings - Registration Exemptions (cont d) Form Form F2 Notice of Regulatory Action Reliance on exemption from IFM registration under Multilateral Instrument Registration Exemptions for Non-Resident IFMs Form F1/35-101F2 Submission to Jurisdiction and Appointment of Agent of Service of Process by Agents of the Broker Dealer Use this form to: Notify the OSC of reliance on the permitted client exemption for international investment fund managers under s. 4 Permitted clients Notify the OSC of reliance on the permitted client exemption for international IFM under s. 4 Permitted clients Notify the OSC of the total assets under management attributable to securities beneficially owned by residents of Ontario as at the most recently completed month Unregistered international investment fund managers must complete this form by December 1 each year To notify the OSC of United States Broker-Dealers and Agent s reliance on the exemptions from registration under National Instrument Conditional Exemption from Registration for United States Broker Dealers and Agents Submission method Complete form and submit a copy online. to registration@o sc.gov.on.ca Complete form and submit a copy online. Form F1 14 Form F2

15 Revised Service Standards Individual Application Effective spring 2014 Applies if: Routine (not novel) Complete Not associated with a new business submission, and No concerns with fitness for registration 15

16 Revised Service Standards Individual Application (cont d) New applications and reactivations Dealing reps 5 working days for 80% of all filings ARs, AARs and CCOs 20 working days for 80% of all filings Notices of termination (NOT) 5 working days for 95% of all filings 16

17 Revised Service Standards New Firm Effective spring 2014 Apply if: Routine (not novel) Non-SRO applicant All questions are answered with sufficient detail All regulatory obligations are met No concerns with fitness for registration, and Timely responses to requests for information 17

18 Revised Service Standards New Firm (cont d) Initial contact within 5 working days for 95% of filings, including fee payment instructions and notification that ready to accept applications for "mind and management" Decision within 90 working days for 80% of filings 18

19 Deficient Filings - Return of Incomplete Applications When applications are substantially incomplete. For example Required business corporation numbers not obtained No audited financial statements No auditor appointed, or Firm is not prepared to file the individual registration applications on NRD Return the application without review If application is re-filed, may require the filing fees to be paid again 19

20 Deficient Filings - Closing Inactive Applications If no response to a request within 3 weeks, application will be considered dormant Notification asking for a status update within 2 weeks Closed if no response 20

21 Common Filing Deficiencies 21

22 Registration Regime Ontario Securities Act sets up an investor protection regime Standards relating to integrity, proficiency, and solvency Must meet these standards at time of initial registration, and continuing condition of registration 22

23 Registration Regime Key Legislation National Instrument (NI) Registration Requirements, Exemptions and Ongoing Registrant Obligations NI Registration Information National Policy Process for Registration in Multiple Jurisdictions Multilateral Instrument Passport System OSC Rule Fees 23

24 Common Deficiencies New Firm Applications Incomplete applications Accompanying individual applications not ready to be filed Insufficient detail about the firm's proposed business activities and operations 24

25 Common Deficiencies New Firm Applications CEO not applying as UDP CCO does not meet proficiency requirements Business corporation numbers not provided for all relevant jurisdictions 25

26 Common Deficiencies Ongoing Firm Filings F5s not filed within specified time frames (generally required within 10 days). For example, Firm/CCO contact information Civil disclosure Shareholder information Change of auditor Insurance information 26

27 Common Deficiencies General New firm has not obtained NOT from prior firm Reinstatement used when individual is not eligible Conflicts of interest not properly assessed Exemptive relief not requested/ obtained for dual registration 27

28 Common Deficiencies - Individuals Disclosure is insufficient, absent or misleading Outside business activities (OBA) Financial disclosure (i.e. solvency) Proficiency Disclosure is late 28

29 Common Deficiencies Individuals (cont d) Disclosure is insufficient, absent or misleading Circumstances of resignation or termination Regulatory disclosure such as insurance licensing Criminal charges and/or convictions Civil or regulatory actions 29

30 Common Deficiencies - Outside Business Activities (OBAs) Current employment OBAs Landlord/owner of apartment building Tax planning Holding company Officer or director positions Equivalent to officer/director positions Trustee Admissions manager at retirement home 30

31 Common Deficiencies - OBA Disclosure Insufficient detail Firm has inappropriately assessed actual or potential conflicts of interest and/or client confusion Firm has provided insufficient explanation addressing why no conflicts or client confusion exist 31

32 Common Deficiencies Identifying High-conflict OBAs Assess three factors: Position of influence (e.g., religious leader) Position of authority (e.g., teacher or city councilor) Potentially vulnerable clients ( e.g., seniors) Expect T&Cs in most cases restricting trading/advising for clients (and close family members) met through the OBA 32

33 Common Deficiencies Financial Disclosure Failure to disclose (initial and ongoing) Bankruptcy/consumer proposals Unpaid debt over $5,000 Unsatisfied judgements Garnishments Requirements to pay (CRA) 33

34 Common Deficiencies Financial Disclosure Individuals with current solvency issues can only be registered with close supervision T&Cs T&Cs can be removed once solvency issue disappears (after F4 is updated and supporting documents provided) 34

35 Common Deficiency - Bankruptcy If not discharged, registration will be refused for a new applicant If discharged within the last 12 months, close supervision T&Cs will be imposed for six months 35

36 Common Deficiencies - Late Filings For not meeting deadlines to notify us of changes in registration information In particular, we see numerous late filings relating to terminations, OBAs, and criminal, civil and financial disclosure NI sets out the deadlines for these and other filings 36

37 Common Deficiencies - Late Filings (cont d) Result in late fees of $100 per business day (to annual maximum of $5,000 per firm) Best practices: File NOTs quickly after registered/ permitted individual leaves firm New OBA does not begin until approved by firm Registered/permitted individuals sign annual attestation that all F4 information is correct 37

38 Common Deficiencies - Proficiency Proficiency Requirements set out in Part 3 of NI Education (examinations or designations) Experience Proficiency Principle 38

39 Proficiency - Education Qualifying courses/designations Time limits on examination requirements Passed exam within last 36 months unless: registered in same category (in any jurisdiction in Canada) in last 36 months, OR gained 12 months of relevant securities industry experience during the last 36 months does not apply to CIM and CFA designations 39

40 Common Deficiency Education Required courses not completed within required time limit or at all No exemption application nor any indication of how the individual might qualify under section 3.3(2)( b) 40

41 Proficiency - Experience Section 3.3(2)(b) where time limit has passed for courses Must have relevant securities industry experience (to the category being applied for). For example, EMD dealing rep has experience with exempt products CCO has experience in supervisory capacity in securities industry 41

42 Experience AR and AARs Relevant Investment Management Experience Refer to CSA Staff Notice Relevant Investment Management Experience for Advising Representatives and Associate Advising Representatives of Portfolio Managers 42

43 Experience - CCOs CCOs of Portfolio Managers and Investment Fund Managers Relevant securities experience Worked in a compliance capacity Provided professional services in the securities industry 43

44 Experience - Common Deficiencies Insufficient information and analysis provided to assess whether the individual has relevant experience Describe duties and responsibilities in detail Explain how they are relevant to the category being applied for 44

45 Experience Common Deficiencies Information provided on duties is exaggerated or otherwise not entirely accurate Firm obligation to make reasonable efforts to ensure truth and completeness It is an offence if an individual gives false or misleading information 45

46 Proficiency Exemption Applications Required where applicant does not have required courses or experience and 3.3(2)(b) does not apply Filed over NRD: with supporting documents sent electronically in pdf format Qualifications or Relevant Experience that is equivalent to, or more appropriate in the circumstances than, the prescribed requirements 46

47 Common Deficiency - Proficiency Exemptions Insufficient relevant information and analysis Overly focused on what the firm does or what the team does No comparative analysis of alternative courses to the required courses/designations Information provided on duties and responsibilities is exaggerated or otherwise not entirely accurate 47

48 Proficiency - General Principle Section 3.4 of NI Applies both at initial registration and at all times throughout registration Responsibility of the registered firm to ensure individuals are proficient at all times 48

49 General Proficiency Principle Individual Must have education, training and experience that a reasonable person would consider necessary to perform activity competently Includes understanding structure features, and risks of each security recommended 49

50 General Proficiency Principle - CCO Education, training and experience that a reasonable person would consider necessary to perform responsibilities competently Includes good understanding of the regulatory requirements Knowledge and ability to design and implement an effective compliance system 50

51 NRD issues and other information 51

52 NRD Password Issues Chief AFR only CSA Service Desk can reset password Chief AFR must know PIN if Chief AFR has lost/forgotten PIN contact OSC Other AFRs CAFR/AFR administrator can reset password Individual applicants (not yet registered) individual user ID/password must be disabled in order to reset 52

53 NRD Issues with Firm Filings NRD does not allow most firm filings/updates. For example, Does not allow firm to add category Does not allow you to add jurisdiction to firm's registration Name change Address change File F5 via pdf and submit electronically we will update NRD 53

54 NRD Firm Submissions 54

55 NRD How to Submit New Individual Application Use one of 4 submission types for individual new to firm Described on NRD System and in Rule Initial Reactivation Reinstatement Add sponsoring firm 55

56 Individual Application Initial Types 56

57 NRD How to Submit New Individual Application (cont d) Must use existing NRD number, if already assigned Warning may mean that they have an NRD number or may mean that they have previously applied Staff can only disclose NRD number directly to individual 57

58 Another Individual - Same Name and Birth Date 58

59 Individual Application Amendments

60 NRD Passport/Non-Passport Filings Check Passport if individual is: Applying for registration in multiple jurisdictions Adding one or more jurisdictions Don t check Passport if individual is: Applying for registration only in their PR jurisdiction Filing only as a Permitted Individual (See 4A CP) 60

61 Passport/Interface Selection 61

62 NRD Navigation/Submission Issues Information not complete Red message will appear at top of screen Often section 8.4 not complete re: relevant securities industry experience 62

63 NRD Navigation/Submission Issues (cont d)

64 NRD Navigation/Submission Issues (cont d) To ensure all is complete Use Continue or Save and Continue button at the bottom of screen To skip to new screen Use local navigator (panel on left of screen will allow you to jump to a different section) 64

65 NRD Navigation/Submission Issues (cont d) 65

66 NRD Finding and Tracking Submissions Work In Progress Submission may have been created by another AFR and in their WIP We cannot see this CAFR/AFR Administrator may reassign Sent to Regulators No longer showing in your WIP Returned to firm Returned to AFR s WIP to correct deficiencies 66

67 NRD - Submission History Current statuses on all submissions Submitted Approved Withdrawn Denied Additional statuses on notices Pending acknowledgement Acknowledged 67

68 NRD - Submission History 68

69 NRD Resubmit Fee Payment

70 NRD Resubmit Fee Payment (cont d) Correct Default EFT Payment Use to resubmit fees that were rejected/returned (e.g. NSF) Will accumulate all rejected/returned fees until paid Will resubmit all rejected/returned fees to parties originally specified 70

71 NRD Resubmit Fee Payment (cont d) 71

72 NRD Resubmit Fee Payment (cont d) Use to submit fees where NRD does not automatically pull fees, e.g. exemption applications or late fees Must specify each jurisdiction and amount 72

73 NRD Resubmit Fee Payment (cont d) 73

74 NRD Annual Fee Exclusion Ensures firm not charged annual fees for individuals surrendering/terminating by Dec 31st One submission for multiple individuals Per jurisdiction basis Can be reversed Must be filed by 3:00 pm Dec 31 st NOT must be filed within 10 days of actual termination date 74

75 NRD Annual Fee Exclusion (cont d) 75

76 NRD Reports

77 NRD Transition New CSA service desk in Moncton, NB (Unchanged) NRD Forms NRD Form 1 - ENROLMENT OF FIRM NRD Form 2 - ENROLMENT OF CHIEF AUTHORIZED FIRM REPRESENTATIVE NRD Form 3 - NRD (BANK) ACCOUNT HOLDER AUTHORIZATION Available under NRD HELP (Enrolment Forms) Forms contain instructions and where to send them No HST on NRD system fees Two transition issues Session times out prematurely Slow to search 77

78 Recap What s New Registration Team Online forms and filings Revised service standards Common Filing Deficiencies Some examples provided More information in CRR annual summary reports NRD Issues NRD Help (on top right corner of NRD) 78

79 General Inquiries Local (Toronto) Toll-free (North America) TTY Fax

80 Questions? 80